UK PRICES SOAR AS INDUSTRY SQUABBLES

LONDON - Car prices in the United Kingdom are substantially higher than elsewhere in Europe for most models. But almost nobody can agree on the reasons why.

Auto manufacturers say the strong pound is the reason for high prices. Consumer groups blame the auto industry's block exemption from European Union competition rules, which they say allows manufacturers to maintain a monopoly over distribution channels. And dealers contend fleet buyers are a primary reason. Big fleets, which buy more than half the cars in the UK, receive substantial discounts from manufacturers.

The British government has become concerned enough to launch an investigation, which would be the second such probe in six years. All sides in the issue presented their cases before a Trade and Industry select committee of the House of Commons 28 October.

The European Commission publishes a survey on car prices every six months. The most recent edition showed UK consumers paid the highest price for 60 of the top 74 models sold throughout the Community. The lowest prices were in the Netherlands, and to a lesser extent in Spain and Portugal.

John Bridgeman, director general of the Office of Fair Trading, a UK government body charged with making sure competition in all business sectors is fair to consumers, told the panel he was trying to find out why the market in the UK is not working properly. A month-long investigation by Bridgeman's office concluded there may be a 'complex monopoly' between dealers and manufacturers.

Bridgeman also said he had reason to believe at least one major manufacturer is engaged in anti-competitive practices - although he declined to name the manufacturer or say how it is alleged to be breaking the rules. The manufacturer is now being investigated, he said.

According to data from the Society of Motor Manufacturers and Traders, manufacturers with the largest market shares in the UK in September included: Ford with 17.25 percent, General Motors (Vauxhall) with 13.4 percent, Rover with 8.8 percent and Peugeot with 8.5 percent.

The Monopolies and Mergers Commission last conducted such an investigation in 1992. After that probe, dealers earned several benefits, including the right to put more than one franchise in a single location.

But, ironically, the investigation has resulted in many dealers and manufacturers working together much more closely - with dealers committing themselves to particular car franchises in return for bigger sales territories.

Bridgeman agreed that the strong pound was certainly a factor in high UK prices, and pointed out that as recently as 1996, vehicles in the UK were cheaper than anywhere else but Portugal.

Ernie Thompson, chief executive of the Society of Motor Manufacturers and Traders, representing manufacturers, told the committee manufacturers could not just 'move prices up and down like a yo-yo' in response to currency fluctuations and other factors.

Such movements, he said, would reduce the equity consumers have in their vehicles.

Views expressed at the House of Commons' hearing spanned the extremes of the issue.

The Consumers' Association believes the network of franchised dealers should be disbanded.

'I don't see the need for cars to be sold by exclusive dealers,' said Andrew McIlwraith, editor of Which?Car, an automotive magazine published by the Consumers' Association. 'I don't see why there shouldn't be a supermarket where consumers can buy whatever type of car they want.'

But dealers and manufacturers point out the exclusive distribution system has arisen for a reason.

'People fail to understand cars are different from ordinary products for a number of reasons,' Christopher Macgowan, chief executive of the Retail Motor Industry Federation, told Automotive News Europe. 'If supermarkets for cars were such a great idea, supermarket operators would have tried harder to get into the business,' he said.

An official with one European car company said other consumer goods have different prices in different countries and there is no outcry to make refrigerators, for example, cost the same everywhere.

'No other consumer durable is priced the same,' he said. 'The politicians have picked on the automotive industry.'

A common European currency would go a long way towards making pricing transparent, he said.

The Consumers' Association did not accept the claims made by the manufacturers and the SMMT that the strong pound is the cause of high prices.

'When you've seen the exchange rate strength,' said Phil Evans, senior policy researcher for the association, 'a Renault should be cheaper here, but it's not.'